DEPARTMENT OF HEALTH AND ENVIRONMENT 
Water Quality Control Commission
5 CCR 1002-61
COLORADO DISCHARGE PERMIT SYSTEM
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61.13(4)	REQUIREMENTS FOR HOUSED COMMERCIAL SWINE FEEDING OPERATIONS
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(h)	Financial Assurance Requirements - Valid financial assurance shall be a condition of conducting a housed commercial swine feeding operation. However, nothing in these regulations shall relieve the permittee of liability for closure, post-closure, and corrective action costs. Violation of any of the financial assurance requirements of these regulations shall be cause for the denial or revocation of the permit.
(i)	The applicant or permittee shall provide financial assurances for the final closure of the housed commercial swine feeding operation and the conduct of any necessary post-closure activities, such that any contamination resulting from actions after the effective date of this regulation is remediated and future contamination is avoided.
(ii)	If required by the Division, based on evidence that conditions create a reasonable potential for the housed commercial swine feeding operation to cause contamination, the applicant or permittee shall provide financial assurances for any corrective action made necessary by such contamination.
(iii)	The financial assurance instruments shall be in the amounts determined in the approved financial assurance plan, or as otherwise required by the Division in accordance with subsection 61.13(4)(h)(vi)(B-C). 
(iv)	A financial assurance instrument shall meet the requirements of subsection 61.13(4)(h) and of Regulation No. 66, as applicable to the instrument.
(v)	Financial assurance instruments for new housed commercial swine feeding operations must be approved by the Division before the permit will be issued, and shall meet the requirements of subsections 61.13(4)(h)(iii-iv).
(vi)	The permittee of an existing housed commercial swine feeding operation shall provide a financial assurance instrument(s) within 90 days following the Division’s approval of a new or revised financial assurance plan as described in subsection 61.13(3)(h) within 90 days following the Division's approval of a new or revised financial assurance plan as described in subsection 61.13(3)(h).  Such a financial assurance instrument(s) shall meet the requirements of subsections 61.13(4)(h)(iii-iv).
(A)	Failure to provide the approved amount of financial assurance shall be a violation of the permit and may be cause for revocation of the permit.
(B)	Where the Division has found a financial assurance plan to be incomplete, and the permittee is either not working in good faith to submit an approvable plan or does not respond to the Division's comments regarding the plan within a reasonable time, the Division may require that interim financial assurance be provided until such time as the financial assurance plan is approved.
(C)	Before requiring interim financial assurance, the Division shall provide the permittee written notice of the deficiencies and an opportunity to cure those deficiencies within ninety (90) days of the written notice. If the period to cure expires without the permittee resolving the deficiencies, and an extension of time has not been granted by the Division, the amount of interim financial assurance required shall be established by the Division, based on relevant information related to the permittee.
(vii)	The permittee shall review and update its approved financial assurance instruments each year in accordance with a schedule established in the permit. The amount of the financial assurance for closure and post-closure, and for any applicable corrective action, shall be recalculated annually by the permittee, as required in the permit, and shall account for inflation or deflation by using the most recent Implicit Price Deflator for Gross Domestic Product or its successor as published by the U.S. Department of Commerce. The recalculated amount shall also reflect any changes in the operation pertinent to the cost of closure, post-closure or required corrective action to address contamination. Provided, that for any year in which there have been no changes in the operation pertinent to the cost of closure, post-closure, or required corrective action and cumulative inflation as calculated above does not exceed 5% since the last update of the financial assurance instruments, no further update of the financial assurance instruments is required. 
(A)	In accordance with the schedule established in the permit, the permittee shall submit to the Division a report that, at minimum, documents that the review and update required above was conducted, explains how the review and update was done, informs who conducted the review and update, informs what the calculated cumulative inflation value is, and informs whether calculated cumulative inflation value exceeded 5% since the last update of the financial assurance instruments.
(B)	The permittee shall have 90 days to provide a financial assurance instrument(s) for any increased amount of financial assurance, as required, after receipt of notification that the revised cost estimates have been approved by the Division.  Such a financial assurance instrument(s) shall meet the requirements of subsections 61.13(4)(h)(iv).
(C)	Failure to provide any increased amount of financial assurance, as required, shall be a violation of the permit and may be cause for revocation of the permit.
(viii)	If at any time the Division determines that a permittee has insufficient financial assurance it shall notify the permittee.
(A)	The permittee shall have 90 days, after receipt of the notification by the Division, to recalculate its financial assurance and provide a financial assurance instrument(s) for any increased amount of financial assurance, as required.  Such a financial assurance instrument(s) shall meet the requirements of subsections 61.13(4)(h)(iii-iv).
(B)	Failure to provide any increased amount of financial assurance, as required, shall be a violation of the permit and may be cause for revocation of the permit.
 (ix)	All financial assurance instruments shall be approved by the Division before being accepted.
(x)	Subject to approval by the Division, the applicant or permittee shall use one or more of the following financial instruments to satisfy assurance requirements:
(A)	One or more of the following instruments that meet the provisions of Regulation No. 66: irrevocable standby letter of credit; trust fund; surety bond; insurance; financial test; and/or written guarantee.
(B)	Other instruments approved by the Division that meet the following requirements, except where the Division determines that the requirements of subsections (I) and/or (IV) are not applicable:
(I)	An alternative instrument provides for the establishment of a standby trust that meets the requirements of Regulation No. 66.
(II)	The issuing institution of an alternative instrument must have the authority to issue that instrument, and its operations shall be regulated and examined by a federal or state agency.
(III)	The issuing institution of an alternative instrument must waive all rights and set off or liens against that instrument.
(IV)	An alternative financial assurance instrument must contain a term that provides that the instrument cannot be cancelled by the issuer of the instrument, unless 90 days prior written notice is given to the Division and the Division gives written consent.
(V)	Uses wording approved by the Division.
(xi)	The permittee shall immediately notify the Division of any notice received or action filed alleging the insolvency or bankruptcy of an institution that issued to the permittee a financial assurance instrument, or alleging any violations of regulatory requirements that could result in suspension or revocation of the issuing institution's charter or license to do business. 
(A)	In the event the permittee becomes aware that an issuing institution is unable to fulfill its obligations under a financial assurance instrument for any reason, notice shall immediately be given to the Division.
(B)	The permittee shall have 90 days from the date of providing notice to the Division as required under subsection 61.13(4)(h)(xi) to submit a financial assurance instrument(s) that replaces the required amount of financial assurance.
(C)	Failure to provide any substitute or replacement financial assurance, as required, shall be a violation of the permit and may be cause for revocation of the permit.
(xii)	Release of an approved financial assurance instrument - The Division will give written consent that a permittee or an institution that issued an instrument may, prior to closure, post-closure, and corrective action activities beginning at a permitted facility(ies), terminate an approved financial assurance instrument(s) when subsections (A) and (B) below have been satisfied, and/or the applicable provisions of Regulation No. 66 for the instrument(s) have been satisfied:
(A)	A permittee or institution that issued an instrument gives to the Division 90 days prior written notice of its request that a financial assurance instrument(s) be released.
(B)	The permittee has provided a substitute financial assurance instrument(s) for the same amount of financial assurance that was provided by the instrument(s) requested to be released.  Such a substitute instrument(s) must meet the requirements of subsections 61.13(4)(h)(iii)-(iv).
(xiii)	Release of the Permittee from the Requirements for Financial Assurance - When closure, post-closure, and corrective actions required by a permit are complete or partially complete, financial assurance shall be released by the Division as follows:
(A)	When the Division determines that initial closure activities have been completed for an operation, financial assurance, less identified retainages, shall be released.
(B)	A sufficient amount of financial assurance shall be retained to pay for estimated costs of post-closure remediation activities. This portion of the financial assurance shall be held for a period of at least three (3) years after initial housed commercial swine feeding operation closure activities are completed, unless the Division determines that a shorter period of time is appropriate.
(C)	The Division may release portions of the corrective action financial assurance for remediation of residual soil contamination, remediation of ground water contamination, or clean-up of any spill or breach when it determines that identified phases of required corrective action have been satisfactorily completed, less any retainages for completion of remaining requirements, such as confirmatory monitoring. Any amount remaining following final satisfactory completion of corrective action shall be released to the permittee.
(D)	Release of any amounts of financial assurance shall not release the permittee or other responsible person from any responsibility for meeting closure or corrective action requirements.
(E)	When the Division determines that the provisions of Regulation No. 66 that address reimbursement of financial assurance have been satisfied, as applicable to the permittee’s approved financial assurance instrument(s).
(xiv)	Forfeiture of Bond or Other Form of Financial Assurance.
(A)	The Division may initiate financial assurance forfeiture after notice to the permittee and any surety that the permit has been violated and that there is a reasonable likelihood that the closure, post-closure, or corrective action obligations of the permittee will not be met.
(B)	The Division will direct the expenditure of forfeited funds to remedy and abate the circumstances for which any financial assurance was required.
(C)	Use of all financial assurance shall not relieve the permittee or other responsible parties from responsibility and liability for closure, post-closure, and corrective action costs. The Colorado Attorney General may bring suit to recover any costs incurred by the state for closure, post-closure or corrective actions not covered by collected financial assurance monies.
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61.64	STATEMENT OF BASIS, SPECIFIC STATUTORY AUTHORITY, AND PURPOSE:  JULY 12, 2010 RULEMAKING, EFFECTIVE DATE OF AUGUST 30, 2010 - HOUSED COMMERCIAL SWINE FEEDING OPERATION FINANCIAL ASSURANCE REQUIREMENTS
The provisions of section 25-8-202(1)(d) and (i) and (2); and sections 25-8-501 to -504, C.R.S. provide the specific statutory authority for this amendment to the Colorado Discharge Permit System Regulations.  The Commission has also adopted, in compliance with section 24-4-103(4), C.R.S., the following Statement of Basis and Purpose.
BASIS AND PURPOSE
A.	APPLICABILITY
The provisions in Commission Regulation No. 61, 5 CCR 1002-61, subsection 61.13(4)(h) apply to financial assurance requirements for housed commercial swine feeding operations (HCSFOs).  In this rulemaking hearing, the Commission also adopted a new regulation, Regulation No. 66, which specifies the criteria for certain financial assurance instruments that HCSFOs can use to provide financial assurance.  Therefore, HCSFOs are subject to the financial assurance provisions of both Regulation No. 66 and subsection 61.13(4)(h) of Regulation No. 61.
B.	BACKGROUND AND PURPOSE
The proposal considered by the Commission during this rulemaking hearing is the adoption of revisions to subsection 61.13(4)(h) of Regulation No. 61.  The proposal is the result of a stakeholder process that was initiated in November 2008 for the purpose of establishing a guidance document for the financial test and guarantee financial assurance mechanism for HCSFOs, in accordance with subsection 61.13(4)(h)(viii) of Regulation No. 61.  A proposed guidance document was brought before the Commission at an informational hearing in November 2009.  In response to statements from the Division and HCSFO producers at the hearing, the Commission agreed that, in lieu of continuing the hearing on the guidance document, a rulemaking hearing would be set to consider putting into regulation the criteria for all financial assurance instruments.  As a result, the Division met with stakeholders to develop the proposal for today’s rulemaking.
As discussed above in the “Applicability” section, the Commission also adopted in today’s rulemaking hearing a new regulation, Regulation No. 66, which specifies the criteria for certain financial assurance instruments that HCSFOs can use to provide financial assurance.  Because these criteria do not exist in the current subsection 61.13(4)(h) of Regulation No. 61, the Commission adopted revisions to this subsection that accomplish the following outcomes:
•	Removes language rendered obsolete by the placement of financial assurance instrument criteria in Regulation No. 66.
•	Adds language that makes reference to the provisions of Regulation No. 66.
•	For consistency, revises “financial assurance mechanism” to be “financial assurance instrument.”
•	Adds language and restructures existing language for the purposes of providing clarity, segregating discrete provisions, and making needed connections to other provisions in subsection 61.13(4)(h).
•	Adds a new subsection that addresses the release of an approved financial assurance instrument.
•	Adds a new subsection that establishes submittal requirements for a permitee’s annual update and review of financial assurance instruments. 
•	Renumbers the subsections as a result of adding three new subsections.
C.	DISCUSSION OF REVISED PROVISIONS
Subsection 61.13(4)(h)(iii):  This subsection was revised to clarify that the monetary value of financial assurance instruments can also be required to be the amount resulting from the interim financial assurance provisions of section 61.13(4)(h)(vi)(B)-(C).  In addition, the phrase, “and shall use wording approved by the Division”, was removed because financial assurance instrument criteria is now specified for six specific instruments in the new Regulation No. 66.  For the purpose of having the phrase still apply to an alternative financial assurance instrument approved by the Division, the phrase was placed in new subsection 61.13(4)(h)(x)(B)(V).
New subsection 61.13(4)(h)(iv):  This new subsection was added to refer to the financial assurance instrument criteria in subsection 61.13(4)(h) and to the six instruments in Regulation No. 66.
Subsection 61.13(4)(h)(v): This is subsection 61.13(4)(h)(iv) in the current regulation.  The language was revised to add the word “instruments” after “financial assurance”, and to refer to the financial instrument requirements of subsections 61.13(4)(h)(iii)-(iv).
Subsection 61.13(4)(h)(vi): This is subsection 61.13(4)(h)(v) in the current regulation.  The language was revised to provide clarity, to add the word “instruments” after “financial assurance”, and to refer to the financial instrument requirements of subsections 61.13(4)(h)(iii)-(iv).
Subsection 61.13(4)(h)(vii): This is subsection 61.13(4)(h)(vi) in the current regulation.  The language was revised to refer to “approved” financial assurance instruments, and to segregate discrete provisions into new subsections (B) and (C).  In addition, subsection (B) was revised to provide clarity and to refer to the financial instrument requirements of subsections 61.13(4)(h)(iii)-(iv).  
The existing regulation requires that permittees annually review and update their financial assurance instruments in a specified manner.  However, the regulation does not provide for a permittee to verify to the Division that it conducted the review and update.  Therefore, the Commission adopted a new subsection (A) that requires a permittee to annually submit to the Division a report documenting the permittee’s update and review of financial assurance instruments. 
Subsection 61.13(4)(h)(viii): This is subsection 61.13(4)(h)(vii) in the current regulation.  The language was revised to segregate discrete provisions into new subsections (A) and (B).  In addition, subsection (A) was revised to provide clarity and to refer to the financial instrument requirements of subsections 61.13(4)(h)(iii)-(iv).
Subsection 61.13(4)(h)(ix): This is subsection 61.13(4)(h)(viii) in the current regulation.  The language was revised to add the word “instruments” after “financial assurance”, and to delete all language after the first sentence.  Most of the deleted language pertained to requirements for financial assurance instruments and is now obsolete because of the addition of Regulation No. 66.  The deleted language pertaining to the specific financial assurance instruments that a permittee must use was moved to new subsection 61.13(4)(h)(x).
New subsection 61.13(4)(h)(x):  This new subsection received the language from the current subsection 61.13(4)(h)(viii) pertaining to the specific financial assurance instruments that must be used by a permittee.  Also, because of the new Regulation No. 66, the existing criteria pertaining to all financial assurance instruments was moved to subsections 61.13(4)(h)(x)(B)(I)-(V), where they now pertain only to an alternative instrument approved by the Division.  With regard to subsection (IV), the Commission is aware that the process of acquiring a financial assurance instrument, such as a letter of credit or bond, is rigorous and time-consuming.  Therefore, the number of days of written notice that must be given prior to an issuing institution cancelling an instrument was revised from 60 days to 90 days in order to allow more time for a permittee to acquire a substitute instrument.
Subsection 61.13(4)(h)(xi): This is subsection 61.13(4)(h)(ix) in the current regulation.  The language was revised to provide clarity and to segregate discrete provisions into new subsections (A), (B), and (C).  In addition, subsection (A) was revised to add the word “instrument” after “financial assurance”, and subsection (B) was revised to have language that refers to requirements of subsection 61.13(4)(h)(xi).
New subsection 61.13(4)(h)(xii):  The Commission adopted this new subsection to establish provisions that address the release of an approved financial assurance instrument prior to closure activities being initiated.  The adopted language includes a provision requiring that an instrument be released when the relevant conditions of Regulation No. 66 for the instrument have been met.
Subsection 61.13(4)(h)(xiii): This is subsection 61.13(4)(h)(x) in the current regulation.  Language was added to this subsection to clarify that this subsection pertains to the release of financial assurance requirements when closure actions are complete or “partially complete.”  This differentiates the purpose of this subsection from that of subsection 61.13(4)(h)(xii).  In addition, the provision in existing subsection (A) was deleted.  This provision, which addressed the prior written notice requirement for cancelling a financial assurance instrument, is now included for the six instruments in Regulation No. 66, and, for other instruments approved by the Division, is now required under subsection 61.13(4)(h)(x)(B)(IV).  
The language in existing subsection (B) was deleted because it exists earlier in the subsection.  As a result, existing subsections (I)-(IV) were revised to be new subsections (A)-(D).
The Commission adopted a new subsection (E) that requires the release of financial assurance when a reimbursement provision(s) in Regulation No. 66 has been satisfied, as applicable to the permittee’s approved financial assurance instrument(s).
Subsection 61.13(4)(h)(xiv): This is subsection 61.13(4)(h)(xi) in the current regulation.  Subsection (B) was revised to change the word “may” to “will”, prior to the phrase “direct the expenditure of forfeited funds…”
PARTIES TO THE RULEMAKING HEARING
1.	Colorado Livestock Association (CLA)
2.	Mountain Prairie, LLC
3.	Murphy-Brown of Yuma
4.	M. Sue Jarrett
5.	Seaboard Foods, LLC