DEPARTMENT OF PUBLIC HEALTH AND ENVIRONMENT

Solid and Hazardous Waste Commission

Hazardous Materials and Waste Management Division
6 CCR 1007-2

STATEMENT OF BASIS AND PURPOSE AND SPECIFIC STATUTORY AUTHORITY FOR

Amendment to the Regulations Pertaining to Solid Waste Sites and Facilities (6 CCR 1007-2, Part 1) – Appendices (Table of Contents), Section 4.6.4 (Surety Bonds Guaranteeing Performance or Payment) and Appendix A (Wording for Financial Assurance Mechanisms).

(Adopted by the Solid and Hazardous Waste Commission on August 16, 2022)

Basis and Purpose

I.	Statutory Authority

These amendments to 6 CCR 1007-2, Part 1 are made pursuant to the authority granted to the Solid and Hazardous Waste Commission in § 30-20-104.5, C.R.S and § 30-20-109, C.R.S.

II.	Purpose of revised regulations

The purpose of Section 4.0 of the solid waste regulations is to provide assurance that funds will be available to the Department when needed for adequate closure and post-closure of, and corrective action at, solid wastes disposal sites and facilities should the owner and operator become financially insolvent. These regulations require the owners and operators to secure financial instruments to demonstrate adequate coverage until a release is granted by the department. 

The proposed changes to the financial assurance regulations is to correct typographical errors, revise deadlines to improve timeliness for annual reporting requirements.  Update the list of allowable mechanisms, and enhance terms and conditions for both insurance and surety bond mechanisms.

Discussion of Regulatory Proposal

1)	Table of Contents – Appendices – Appendix A - Amended
Proposed correction of Appendix A title as it appears in the Table of Contents. This will replace “Financial work sheet” with “Financial Assurance Instrument” as specified in Appendix A.

2)	Section 4.5.1 - Annual Inflation - Amended 
This section requires the owner or operator to annually revise the closure, post-closure, and any corrective action cost estimate for inflation and must submit this estimate sixty (60) days prior to the anniversary date of the establishment of the financial instruments for the department approval. 

Proposed revisions will standardize the annual inflation submission deadline to April 15th.

3)	Section 4.6.1 Allowable Financial Assurance Mechanism – New   
This section identifies the various mechanisms that the owner and operators may use to demonstrate financial assurance. 

Proposed revisions to Section 4.6.1 (D) will add an alternative instrument, Cash Deposit Holding Account, which the owner and operator may use to demonstrate financial assurance.

4)	Section 4.6.4 Surety Bonds Guaranteeing Performance or Payment – Amended
Subsection 4.6.4 (F) states the surety may cancel the bond by sending notice of cancelation by certified mail, or another trackable delivery service, to the owner or operator and to the department. A cancelation may not occur until one hundred twenty (120) days after the notice of cancelation has been received by both the owner or operator and the department, as evidenced by return receipts.

Proposed revisions will add specific contact information for whom the cancelation notices must be sent.

5)	Section 4.6.5 Insurance – Amended
Subsection 4.6.5 (J) requires the insurer to cancel the policy by sending notice of cancellation by certified mail, or another trackable delivery service, to the owner or operator and the department.

Proposed revisions will add specific contact information for whom the cancelation notices must be sent.

Subsection 4.6.5 (K) requires the owner and operator to obtain a replacement mechanism is the insurer cancels the policy.

Proposed revision will require the owner and operator to replace the financial assurance mechanism before the end of the 120-day period.

Proposed addition of Subsection 4.6.5 (P) to require the owner and operator to provide a copy of the insurance policy and endorsements as requested by the Department.

6)	Appendix A – Financial Assurance Instrument Language – Amended
Section III. Surety Bond and Section IV. Performance Bond amended to align with the proposed changes described in Section 4.6.4 (F) in list item number 4 above.

Section V. Insurance amended to align with the proposed changes described in Section 4.6.5 (J) in list item number 4 above.

		Section VII. Approved Wording for Cash Deposit Holding Account
Issues Encountered During Stakeholder Process: 

	Virtual stakeholder meeting on April 4, 2022:
•	An invitation was extended to 105 people, including internal employees, Surety Bond firms, Insurance companies, and Solid Waste Landfill owner/operators. Only 49 people registered for the meeting out of a total of 105.
•	The deadline for feedback/questions/concerns was April 13, 2022.
•	23 comments, questions, and concerns were received.

Questions/Comments/Concerns/Answers

1)	Section 4.5.1 - Annual Inflation - Amended:

Q:  Could the annual inflation rate increase be posted on the CDPHE website and sent out with The new regulation changes?
A:	These rates are posted on the Solid waste financial assurance page. In the future, we plan to send all facilities annual notices of rate change and reminders for the annual submission. 

Q:	The annual inflation revision will now be due by April 15th. Would we provide the new financial assurance instrument at the same time?
A:	Yes, the revised mechanism should be submitted to us and we will extend the proposed deadline from April 15th to April 30th. The idea of this deadline is that if the U.S. Department of Commerce provides the implicit price deflator by the end of February, we will post it on our website the first week of March. Then the facility should have ample time to update their mechanism.

Q:	The interpretation of the current provision was during the active life of the solid waste disposal site and facility, the owner or operator must annually revise the closure, post- closure, and any corrective action cost estimate for inflation and must submit this estimate for department approval. 
A:	If you have specific questions about the FA or need to confirm numbers, we can have those conversation prior to adjusting the mechanism. If it’s just an annual inflation adjustment, then the mechanism should be submitted by April 30th. In practice, facilities seldom submit the update separately from the modified instrument, preferring to include it in their yearly inflation adjustment.

Q:	We might give our cost estimate but until [a facility] knows that the State approves a certain amount we won't get the bond in that new amount until we know it's correct and agreed upon by both the State and the company.
A:	There are a few facilities who present the proposed cost estimates prior to adjusting the mechanisms. Other facilities will adjust the mechanism and submit it to the division. If there are changes in construction of new cells or other landfill facilities that increase or decrease financial assurance cost requirements. Note that this is not an annual adjustment but rather an actual recalculation of the cost estimate using current unit costs and operational assumptions. Please work with the solid waste program permitting staff in this regard.

Q:	Since there appeared to be varying interpretations among the regulated community regarding the timing for submitting the financial assurance instrument, would it be helpful to clarify in Section 4.5.1 when the instrument should be provided to the department?
A:	The division has agreed to amend the language and share it to our stakeholders prior to the Commission Meeting on May 16th to better explain what needs to be submitted.

Q:  It might also be helpful if the Financial Assurance renewal requirement is part of a checklist on the annual permit renewal forms. I have permits in multiple States and in all of them, except Colorado, the required updated Financial Assurance is always mentioned in the renewal paperwork.
A:	Program will add a reminder to the Waste Tire Facility Annual Report which is due March 1st.	For landfill inspections, the Financial Assurance is already included in the checklist.

Q:	Are we trying to get everyone to the April 30th deadline by 2023?
A:	Owners/operators using the local government financial test are not required to meet the April deadline. This is because, in 2020, we proposed changes to the local government financial test, and so those annual submissions are due to us seven (7) months after fiscal year end has closed.

2)	Section 4.6.4 Surety Bonds Guaranteeing Performance or Payment – Amended:

Q:	Concern for CDPHE's added language/requirements for insurance/bond companies that is not now a standard is that there will be additional cost from those providers to meet these requirements. Has that been researched on your end? 

A:	Amending existing terms and agreements would make it so the bonds would all need to go through new approval processes. If the bonding company objects to the language they will issue notice that they are giving 30 days notice that they will no longer provide the bond and at that point we would have to look for another company to write the bond that may very well charge higher rates for the bonds. There is an additional cost to the principal whenever the bond amount increases. 
	CDPHE will remove the proposed language requiring CDPHE approval prior to bond cancellation. We will improve the contact information for where the cancelation notices must be sent, rather than requiring CDPHE approval prior to bond cancellation. 

3)	Section 4.6.5 Insurance – Amended:

Q:	A question from our financial folks (captive insurance) is it's not typical to include a regulatory body as an additional insured as it's mostly seen, for example, in the case of a landlord being an additional insured on a renter's policy. In our policies and here's an excerpt from one of our policies that we have for, I believe, all of our Colorado sites under the terms of the policy for the coverages, "to pay on behalf of the insured to any authorized party at the direction of the regulatory body only those reasonable and necessary expenses for which the insured becomes legally obligated", and that would be for both closure and post-closure costs. So, it's believed that we have the adequate assurances in our language and the policy to cover that and it seems like an additional requirement that our folks have typically have not seen.

A:	Naming CDPHE as an additional insured seems to place a greater burden on regulated entities and their insurers. This proposed change has been removed from the regulations.

	2nd Virtual stakeholder meeting on June 6, 2022:
•	An invitation was extended to 105 people, including internal employees, Surety Bond firms, Insurance companies, and Solid Waste Landfill owner/operators. Only 28 people registered and only 18 people attended the meeting.
•	The deadline for feedback/questions/concerns was June 20, 2022.
•	Only one comment was received prior to the stakeholder meeting.

Questions/Comments/Concerns/Answers

1)	Section 4.6.5 Insurance – Amended:

Q:	We noticed that you’ve retained the requirement to replace an insurance policy within 7 days after cancelation.  Could you explain why CDPHE retained this short window?  We are surprised at this timing, given the many steps needed to secure a new financial assurance mechanism, and given the much longer windows, in the current regulations, to secure new financial assurance after the cancelation of other mechanisms.

A:  The seven-day period is unrealistic to secure a new mechanism and we propose new 
language: 4.6.5 (K) If the insurer cancels the policy, the owner or operator must obtain replacement financial assurance as required in Subsection 4.6.1 (D) before the end of the 120-day period.

Regulatory Alternatives

	No other regulatory alternatives were evaluated.

Cost/Benefit Analysis

A cost-benefit analysis will be performed if requested by the Colorado Department of Regulatory Agencies.